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Speaker 1: Broadcasting live to New York, Gloomberg eleventh Yo to Washington,

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Speaker 1: d C, Bloomberg to Boston, Bloomberg twelve hounds to San Francisco,

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Speaker 1: Bloomberg to the country. Sees XM Channel one nine and

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Speaker 1: around the globe. The Bloomberg Radio Plus happened Bloomberg dot Com.

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Speaker 1: This is Bloomberg Surveillance. The morning eight thirty on Wall Street.

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Speaker 1: I Michael McKee along with Tom Keene. Economic Indicators brought

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Speaker 1: to you by Commonwealth Financial Network. When it's time to

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Speaker 1: change the conversation, talk with a broker dealer r I

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Speaker 1: A that's ready to listen call eight six two three

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Speaker 1: six three eight or is it Commonwealth dot Com to

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Speaker 1: learn more? No major indicators at the eight thirty hour today. However,

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Speaker 1: we do have new home sales out at ten am

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Speaker 1: and that will get a lot of attention. We saw

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Speaker 1: the decline in existing home sales reported earlier this week,

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Speaker 1: and of course at nine o'clock coming up at the

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Speaker 1: top of the hour, Tom Keene and I will be

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Speaker 1: interviewed US St. Louis Federal Reserve President James Bullard, which

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Speaker 1: we do not but we are going to try to

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Speaker 1: find out interesting Yesterday Patrick Harker, the new president of

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Speaker 1: the Philadelphia FED, made specific reference to it and said,

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Speaker 1: I am not one of the two dot people. I

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Speaker 1: think we should raise rates more than that. So we'll

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Speaker 1: see if we can't start placing some of these people.

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Speaker 1: This is a good person to talk to as we

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Speaker 1: go to James Bullard in the next thirty minutes, even

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Speaker 1: less than thirty minutes. John Norman is a student of

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Speaker 1: the linkage of economics into foreign exchange. He's out of

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Speaker 1: Georgetown Economics with a career path at JP Morgan that

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Speaker 1: has led him to ride herd on the dollar. Let

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Speaker 1: me quote Norman. Despite the federal reserves, well known serial

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Speaker 1: forecast errors, markets nonetheless move every time James Bullard lowers

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Speaker 1: the dots. I put in a little phrase there, John Norman,

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Speaker 1: to do that for entertainment. But you really don't know

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Speaker 1: where the dots are, do you, John Norman? Well, we

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Speaker 1: know is the dots and seem to go down every quarter,

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Speaker 1: and investors tend to extrapolates from that, and I think

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Speaker 1: that's the main worry that investors have every time the

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Speaker 1: FED rolls up to one of these quarterly press conferences.

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Speaker 1: Even though the FED has its dots way above the market.

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Speaker 1: The fact that they've been lowering them for so long

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Speaker 1: makes some people think they may never hike again. Bill

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Speaker 1: Dudley said in a speech a bit ago, for guidance

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Speaker 1: maybe a thing of the past. Will the dots be

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Speaker 1: a thing of the past? I don't think the dots

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Speaker 1: will be. Uh. They they may lose their their sticker

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Speaker 1: shock for for investors that the less accurate these are

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Speaker 1: as as a predictor of future rates, the less investors

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Speaker 1: will pay attention to them. But I don't think they'll

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Speaker 1: disappear as a as a piece of information that the

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Speaker 1: FED provides. But I agree with the idea that the

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Speaker 1: forward guidance is much less credible when you're at a

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Speaker 1: turning point. Uh. With some with respect to some part

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Speaker 1: of the business cycling right now where going through a

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Speaker 1: rethink around inflation, and in that kind of environment where

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Speaker 1: you can't have much certainty around CPI, you can't have

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Speaker 1: much certainty around FED policy. Is this a situation where

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Speaker 1: investors think the dots are wrong or hope there wrong?

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Speaker 1: In the sense that every time the FED discusses the

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Speaker 1: idea of raising rates, we seem to have a temper

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Speaker 1: tantrum in the markets. People uh just don't want to

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Speaker 1: give up getting additional having that buyer of last resort

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Speaker 1: out there, right. I would say the realization of the

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Speaker 1: dots is certainly a market event, and and it's a

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Speaker 1: high ball market event. Even if the FED is only

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Speaker 1: projecting a couple of hikes over the next or through

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Speaker 1: the balance of the year, that that's still about twice

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Speaker 1: as much as what's in the money market curve. So

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Speaker 1: you're right that investors do fear that the feed is

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Speaker 1: actually going to deliver on its on its on its

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Speaker 1: stipple design, and if they do, you're gonna see race

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Speaker 1: moving up in the trusury market and the dollar moving

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Speaker 1: up as well. You get a taste of that just

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Speaker 1: over the past two or three sessions, as a number

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Speaker 1: of have said, officials have um reaffirmed their their sort

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Speaker 1: of commitment to a couple of eyes this year. What

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Speaker 1: would you like to ask Dr Bullard? I mean, just

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Speaker 1: very simply, you're off the foreign exchange, as you've written

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Speaker 1: brilliantly in the dollar recently. What's your question for Jim Bullard?

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Speaker 1: I would probably ask them, um why they've needed to

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Speaker 1: move down their rate projections so substantially over the past

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Speaker 1: year and a half, What what, why and and why

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Speaker 1: if they something is motivating them to do that, they

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Speaker 1: haven't marked down their views on on growth that substantially

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Speaker 1: there seems to be a bit of inconsistency and in

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Speaker 1: sort of expressing this belief in um in in a

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Speaker 1: firmer u S economy, yet every quarter moving down their

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Speaker 1: expectations from where policy rais need to be. Where is

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Speaker 1: the opportunity and for an exchange, right now we see

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Speaker 1: a lot of reanalysis of dollar perpetual dollar strength is

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Speaker 1: fading into the distance. You've written in that as well.

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Speaker 1: Where is the opportunity and for an exchange, let's say

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Speaker 1: it's probably two buckets. There's a there's a lot of

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Speaker 1: tactical opportunities over the next say nine months, is to

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Speaker 1: set hikes a couple of times, and there's probably a

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Speaker 1: big strategic opportunity still in UH in the end, so

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Speaker 1: that the tactical opportunities are all around being long dollars

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Speaker 1: some quarters, short dollars other quarters. Simply because I think

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Speaker 1: that the broad index is an arrange, and it's how

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Speaker 1: quiet an attorney point, it's it's probably gonna move sideways

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Speaker 1: plus or minus five percent from where we are now. UM.

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Speaker 1: Some people consider that an opportunity, you know, I certainly

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Speaker 1: do UM, but that means that the clients have to

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Speaker 1: be quite numble. I'd say the bigger opportunity is more

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Speaker 1: around the end. I still feel like if we're looking

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Speaker 1: at a fat cycle that's gonna be pretty shallow and

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Speaker 1: and a Japanese economy that still has a big current

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Speaker 1: accountclor plus, the end could appreciate for a while. And

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Speaker 1: if a consequence of of FED tightening over the next

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Speaker 1: year could be a us prossession in SEEN, I think

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Speaker 1: that is going to add to the upside for the end.

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Speaker 1: There's another big strategic opportunity everyone's looking at, and that's UM,

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Speaker 1: the move back into emerging market currencies and and commodity

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Speaker 1: currencies UM. But I think it's premature for that. It's interesting,

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Speaker 1: certainly the case that UH clients should be buying UM

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Speaker 1: the they should be bullish on EM currencies and commodity

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Speaker 1: currencies if they think the FED is going to be

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Speaker 1: on hold. But the FED needs to be on hold

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Speaker 1: for the right reasons. It needs to be on hold

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Speaker 1: because first, it's never coming back UM. And if you're

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Speaker 1: convinced that that's the kind of world we're end and

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Speaker 1: fine by that stuff. But if you think, um, we

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Speaker 1: could be in a world where information is only temporarily

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Speaker 1: at bay, or if you believe that we're in a

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Speaker 1: world where the FED pushes us into recession, it's it's

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Speaker 1: way premature to be buying those on a strategic basis.

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Speaker 1: And John Norman off the desk in London with JP

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Speaker 1: Morgan today as we look at foreign exchange. Of course

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Speaker 1: it's linkage into economics. We will continue with John Norman

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Speaker 1: uh here into our next section. Right after that, Michael

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Speaker 1: McKee and I will speak with Jim Bullard of the St.

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Speaker 1: Louis FED. Mike, just so much to talk about Jim

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Speaker 1: this morning. There go talk some more with John about

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Speaker 1: that coming up. Yeah, well, Jim Bollard here in minutes

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Speaker 1: or so, a churn to the market, futures flat. They

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Speaker 1: yield one point nine this hour of surveillance pot by

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Speaker 1: Volvo White Cars, White Planes. Visit Volvo Cars, White Planes

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Speaker 1: dot com. Here's Michael bar with headlines mind Tom, thank

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Speaker 1: you very much. Belgian police continued to hunt for terrorist

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Speaker 1: suspects and yesterday's attack in Brussels. Belgian prosecutors's authorities have

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Speaker 1: not arrested demand in this suspect in the Belgian bombing,

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Speaker 1: year old Jean Leshraui. The Islamic state has claimed responsibility

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Speaker 1: for the attack in Brussels that killed thirty four people.

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Speaker 1: Donald Trump was asked about national security in the US

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Speaker 1: after the Brussels attack. Trump, on Bloomberg's with all due respect,

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Speaker 1: took a swipe at Hillary Clinton. If there are crises

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Speaker 1: like we saw in Brussels, and this election focused a

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Speaker 1: lot on natural security, you think you can beat her

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Speaker 1: head to head on national seaci. I think so. I

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Speaker 1: think every time we have a problem in this world,

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Speaker 1: I think I do better. That's been proven to your pulse.

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Speaker 1: I mean, it's not that I want. I'd rather not

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Speaker 1: have any problems and do wors okay, if I had

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Speaker 1: my choice. The entire interview can be seen at five

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Speaker 1: pm All Street time on Bloomberg TV. With all due respect.

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Speaker 1: Voters have had their saying. Tuesday's presidential primaries and caucuses.

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Speaker 1: Democrat Hillary Clinton and Republican Donald Trump extended their leads

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Speaker 1: with victories and the Arizona primaries in Texas, Senator Ted

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Speaker 1: Cruz was a big winner in Utah's Republican CAUCUSUS Bernie

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Speaker 1: Sanders won the Democratic caucuses in Utah and Idaho. Global

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Speaker 1: News twenty four hours a day, powered by our twenty

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Speaker 1: four hundred journalists more than a hundred fifty news bureaus

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Speaker 1: from around the world. I'm Michael Barr Bank Tom, Thank you, Michael.

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Speaker 1: Time now for the Rakatina Auto Group Bloomberg NBC Sports

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Speaker 1: Update with John Stashaw. All right, Michael on the local

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Speaker 1: NBA and NHL team in action. Last night, the Nets

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Speaker 1: lost at home to Red Hot Charlotte, one of five

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Speaker 1: one hundred Hornets have taken nineteen the last twenty four games.

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Speaker 1: Nix Or in Chicago tonight. Rangers host the Bruins in Tampa.

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Speaker 1: Last night, Yankees beat the met six to three. Battle

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Speaker 1: of young pitchers who reached the majors last year. Luis

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Speaker 1: Severino again pitched well. Stephen Matt's not so much gave

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Speaker 1: up five runs in the second any baseball on display

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Speaker 1: yesterday in Havada, everyone in agreements one thing the U

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Speaker 1: S and Cuba share a love for. So there was

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Speaker 1: President Obamas that next to Cuban counterpart, Real Costro watching

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Speaker 1: Tampa Bay Rays beat the Cuban national team four to one,

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Speaker 1: only once before in a major league team, which is

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Speaker 1: a cubas and revolution. For the NFL owners and their

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Speaker 1: meetings today in Florida, there may be a decision on

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Speaker 1: a rule change that would object from a game of

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Speaker 1: player who has had two on sportsmanlike conduct penalties. Also

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Speaker 1: no vote yesterday on proposals to expand the use of

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Speaker 1: incident replay. The NFL has made permanent the longer point

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Speaker 1: after touchdown that began last season and did achieve its

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Speaker 1: goal of making the extra point not as automatic. With

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Speaker 1: the Bloomberg NBC Sports Update, I'm John stan Shandler. John,

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Speaker 1: thank you so much. Mike. Let's twenty minutes away from

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Speaker 1: Jim Bullard. When n sight of people that he's a centrist,

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Speaker 1: but with great nuance. This is not a guy who's

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Speaker 1: out in the outliers, is he? No? He? Uh. He

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Speaker 1: generally follows the latest developments in the macro economy and

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Speaker 1: does a lot of research on his own. Uh. Some

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Speaker 1: interesting work on what he calls neo Fisherian economics um

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Speaker 1: in recent weeks, and we'll ask him about that. Basically,

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Speaker 1: the idea that the low interest rates are the reason

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Speaker 1: why we are not seeing inflation rise. It's it's not

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Speaker 1: that he's embracing it, but he has looked at that possibility. Yeah. Well,

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Speaker 1: Irving Fisher from not Stanley Fisher, Neo Fisherian, Irving Fisher

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Speaker 1: from I believe a few uh and distant past as

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Speaker 1: well on inflation was Yes, Irving Fisher was with us.

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Speaker 1: It was the Coolidge convention in Cleveland. I believe it was, Uh,

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Speaker 1: James Bullard in twenty minutes Worldwide Bloomberg Surveillance. The Sports

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Speaker 1: jn Tm pledged to accelerate a restructuring through deeper cost

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Speaker 1: cuts and by eliminating an additional two thousand jobs as

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Speaker 1: he forecast a first quarter loss. TIA made the comments

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Speaker 1: in an interview with Francine Laqua on Bloomberg Television. Very

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Speaker 1: risk converse, defensive, and I can tell you that the

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Speaker 1: risking we've done, it's cost us, but it's protected us

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Speaker 1: a lot. If we had not the risked where we've

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Speaker 1: done since we found out about this problem in January,

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Speaker 1: given the shape of the first quarter, the numbers would

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Speaker 1: be much worse. And that's Credit Strees Group chief executive

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Speaker 1: t jn TM speaking with Francine Laquix on Bloomberg Television.

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Speaker 1: US Dock Index futures little change to lower this morning.

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Speaker 1: SNP emity futures down two points, DOWEMNY futures down nineteen,

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Speaker 1: NASA documedy futures down to decks. In Germany's up nine

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Speaker 1: ten percent, ten year treasury up four thirty seconds, the

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Speaker 1: yield one point nine two percent. NIMEX screwed oil down

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Speaker 1: one point two percent or fifty cents to forty nineties.

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Speaker 1: Six of barrel comes Goal down one point eight percent

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Speaker 1: or twenty two dollars eighty cents to twelve twenty five

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Speaker 1: seventy and ounce the Euro at dollar eleven seventy eight

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Speaker 1: then one twelve point seven seven, and Nike down five

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Speaker 1: percent in early trading after its annual forecast missed analysts estimates.

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Speaker 1: That's a Bloomberg business flash, Tom and Mike churn I

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Speaker 1: thanks so much. It is Wall Street. The following is

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Speaker 1: from Bloomberg View opinions in commentary from Bloomberg columnists. I'm

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Speaker 1: Paula Dwire, an editor with Bloomberg View. Just About everything

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Speaker 1: Donald Trump says about trade is wrong, but his use

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Speaker 1: of trade deficit numbers is especially so. To understand why,

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Speaker 1: consider his attacks on Apple, which he accuses of destroying

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Speaker 1: American jobs by making iPhones in China. The devices are

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Speaker 1: designed and engineering in the US. Their software was developed

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Speaker 1: by Apple in the US. Many of the parts come

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Speaker 1: from suppliers outside China, including Germany, Japan, and South Korea.

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Speaker 1: But because China assembles and ships the phones, adding only

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Speaker 1: about six dollars and fifty cents in value. According to

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Speaker 1: one study, the devices value is attributed to China as

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Speaker 1: an export and to the US as an import. You

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Speaker 1: can see how the US trade deficit can quickly become inflated.

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Speaker 1: One economist calculated that this inflation adds forty percentage points

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Speaker 1: to the US trade deficit with China. This is why

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Speaker 1: Apple stamps the back of each of its devices with

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Speaker 1: designed by Apple in California, assembled in China. So when

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Speaker 1: Trump repeatedly claims that the US try deficit with China

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Speaker 1: is five five billion dollars a year, don't believe it.

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Speaker 1: I'm Paula Dwyer, an editor with Bloomberg View. For more

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Speaker 1: commentary and opinion, please go to Bloomberg View dot com.

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Speaker 1: This has been Bloomberg View and Bloomberg Commentary can be

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Speaker 1: heard hourly weekdays on Bloomberg Radio. Michael mckeem, Tom keane

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Speaker 1: again in ten minutes, James Bullard to the St. Louis

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Speaker 1: FED and there's a wonderful precursor to that. John Norman

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Speaker 1: of JP Morgan in London. John, when you look at

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Speaker 1: FED policy, and we've had also whole breakdown in the

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Speaker 1: last couple of years on the cadence and rhetoric of

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Speaker 1: discussion of the dollar by US public officials. Is it

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Speaker 1: appropriate for FED officials to speak on the dollar? Absolutely,

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Speaker 1: it's it's a financial variable that affects the economy. And

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Speaker 1: since they're charged with managing the business cycle to some extent,

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Speaker 1: to ignore a financial variable, whether it's a dollar, credit spreads,

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Speaker 1: equity markets would would be the missile, very important piece

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Speaker 1: of information. Can we say the same about those in

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Speaker 1: the United Kingdom? What an interesting for eight hours it

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Speaker 1: has been with Prime Minister Cameron having to discuss Brexit

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Speaker 1: along with the tragedy in Brussels, and then we saw

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Speaker 1: the Mayor of London, Boris Johnson today reaffirm uh an exit.

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Speaker 1: To tell me how the pound will go back and forth,

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Speaker 1: as we staggered in late June, Well, I think the

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Speaker 1: consequences of of a Brexit are are can be so

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Speaker 1: substantial that unless we see a swing in the polls

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Speaker 1: in favor of the UK remaining in the EU and

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Speaker 1: by a wide margin before the Apple vote on the

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Speaker 1: twenty third of June, I think the pound continues to depreciate.

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Speaker 1: I would say if the the UK voted to leave

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Speaker 1: the EU, you'd probably see an additional ten to decline,

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Speaker 1: so that takes you down to level Yeah, I think that.

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Speaker 1: I think it could reach that on on a on

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Speaker 1: a vote to exit just as extraordinary. That cuts you back, folks,

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Speaker 1: to live and the weakness, Well, I think the way

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Speaker 1: to think about it is it's a regime change. So

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Speaker 1: whenever you have a regime change, there are many types

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Speaker 1: of regime changes for currency markets, and and when those

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Speaker 1: tend to occur, the adjustment and the currency can be

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Speaker 1: anything from from does that does that regime change? And

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Speaker 1: there's a whole philosophy behind this, folks. I think of

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Speaker 1: Popper out of ls among others. If you have a

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Speaker 1: regime change of that type, what does euro sterling do

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Speaker 1: and what does it mean for the export machine that

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Speaker 1: is Germany? Well, I think it's for sure it's going

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Speaker 1: to push the the euro higher, the euro sterling rate higher,

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Speaker 1: and I think, um, depending on the magnitude of that,

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Speaker 1: this could be a hit to European growth. But I

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Speaker 1: don't think of um euro sterling is something that's going

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Speaker 1: to substantially reduce the growth outlook for your area. It's

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Speaker 1: it's the trade sort of linkages with the UK are

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Speaker 1: less important for Europe and say euros trade linkages to

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Speaker 1: the US or the emerging markets. Is there a London

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Speaker 1: alternative on the continent of Europe? And I say that's

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Speaker 1: not after Brussels. I would have said this to you

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Speaker 1: five days ago. Is there a do you see an

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Speaker 1: alternative to the city. Well, if you think of UH

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Speaker 1: comparable cities being defined by the flexibility of the labor market,

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Speaker 1: then no, there's no competitor there. There may be there's

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Speaker 1: there would be no comparable financial center in Europe. You

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Speaker 1: could have uh several competing ones going after the the

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Speaker 1: the the market share at the London currently enjoys, But

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Speaker 1: I seriously doubt you see one single city with the

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Speaker 1: financial influence of London. Ask you about something David Kotok

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Speaker 1: was talking about earlier on the show, and that is

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Speaker 1: the impact of negative rates from around the world. Their

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Speaker 1: work Cumberland Advisors suggest for seeing um US rates depressed

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Speaker 1: by thirty to forty basis points. Would you say that's

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Speaker 1: a fair assessment? And if that's the case, how does

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Speaker 1: the Fed know what to do? And how do how

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Speaker 1: do the markets know what to do? I think that's fair.

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Speaker 1: In this UH broader dynamic of bigger central bank balance

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Speaker 1: sheets as it purchases negative interest rates. It's it's kind

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Speaker 1: of the new conundrum um for bond markets in the

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Speaker 1: sense that it's it's something that depresses rates in the

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Speaker 1: States even as the set is tightening. Question calls conundrum

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Speaker 1: if you know what it is already, but any event,

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Speaker 1: it's a it's a depressed on the long end, and

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Speaker 1: normally we think, you know, the lesson from the greenspan

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Speaker 1: um tightening was that if a conundrum is weighing on

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Speaker 1: the on on long end yields, they have to move

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Speaker 1: short in rates more. But I think, um, the Fed

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Speaker 1: won't necessarily have to raise rates more because the treasury

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Speaker 1: market fails to sell off what what they're getting in

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Speaker 1: exchange instead of higher treasure yields, as they're getting wider

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Speaker 1: credit spreads, weaker equity prices, and a stronger dollar. So

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Speaker 1: you know, the whole kind of range of financial conditions

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Speaker 1: can still tighten in the US even exactly never cracks

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Speaker 1: two percent. This is a really important idea that the

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Speaker 1: markets do for the FED what the Fed can't do publicly.

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Speaker 1: Do I have that right? Yes, that's fair. Absolutely. How

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Speaker 1: many rate increases is the market assisted? Jerry Yelling with

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Speaker 1: two already. It's hard to say. I agree, it's esoteric

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Speaker 1: to say the least. I guess, I guess. All we

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Speaker 1: know is that um despite cash rates having gone up

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Speaker 1: only basis points. Uh, the US is still kind of

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Speaker 1: struggling to consistently print growth and corporate profits are are contracting.

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Speaker 1: So the economy is sort of behaving as if it's

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Speaker 1: at a slump, even with loose monetary conditions that are

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Speaker 1: defined by the cash rates. That's sort of suggumptive of

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Speaker 1: all other financial conditions that are weighing on the US economy,

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Speaker 1: particularly the level of the dollar. John Norman, thank you

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Speaker 1: for a perfect briefing before James Browner. Mr Norman is

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Speaker 1: with JP Morgan in London. Loved to speak to him

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Speaker 1: when we're over visiting London as well, and certainly he's

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Speaker 1: adjusting dollar strength views to more dollars stability to any

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Speaker 1: which pair you're speaking with, also timely there as well. Uh.

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Speaker 1: The discussion on pounds sterling weird. Steve Gallo over at

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Speaker 1: Demo Capital Markets suggests the same vector on Brexit, and

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Speaker 1: only on Brexit you need that vote to get there,

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Speaker 1: but of attend to fifteen percent adjustment, which is in

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Speaker 1: the vicinity with a broad statement of sterling, which um,

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Speaker 1: I'm just in the camp folks that I think it

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Speaker 1: would be a profound change on tourism and the dynamics

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Speaker 1: of consumption within and without the United Kingdom. We'll see

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Speaker 1: what we do if we go from to one. This

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Speaker 1: is the most interesting if you're just joining us worldwide.

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Speaker 1: Bloomberg twelve, Boston, FM, Washington and Baltimore six, the Bay Area,

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Speaker 1: in San Francisco, and of course in New York eleven three. Oh,

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Speaker 1: we say good morning, particularly to all of you on

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Speaker 1: serious and next time Channel one in the Federal Reserve

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Speaker 1: Bank of St. Louis District, James Bullard. I just saw

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Speaker 1: him walk by. Michael McKee has wandered out to greet

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Speaker 1: President Bullard, and we will have an important and lengthy

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Speaker 1: conversation with Mr Bullard. One of the things that's fun is,

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Speaker 1: as a rule, which we've always done on surveillance and

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Speaker 1: Bloomberg Anty economy, we never get together and go over

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Speaker 1: our questions. I have no idea where Michael McKee's going.

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Speaker 1: He has no idea where I'm going, and that makes

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Speaker 1: it interesting. We're gonna talk about policy. Maybe we'll both

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Speaker 1: maybe we'll talk about the Red Sox beat the Cardinals

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Speaker 1: yesterday and spring training as a game that didn't count

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Speaker 1: unlike in October. But anyways, UM, it's as much fun

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Speaker 1: for me and Mike because we really don't know where

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Speaker 1: we're going with anyone, and particularly with as someone as

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Speaker 1: smart as a PhD from Indiana University James Bullard. So

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Speaker 1: this will be important for those young global Wall Street

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Speaker 1: always Jim Bullard can move the markets to yield one

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Speaker 1: the thirty year bond, haven't quoted an ages two point

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Speaker 1: seven one percent. Oil churns forty one barrel. The yen

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Speaker 1: one twelve eighty. That's a weaker yen, weaker euro one

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Speaker 1: eleven seventy four in sterling. Next, a conversation with Jim

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Speaker 1: Bullard Worldwide Bloomberg Surveillance